Elizabeth Warren 2020: How she went from a regulation critic to Wall Street watchdog

As a law professor in the 1980s and 1990s, Warren criticized the overabundance of government regulations, calling them “a tax,” and spoke to conservative legal groups like the Federalist Society and the Manhattan Institute, a CNN KFile review of Warren’s academic research, interviews and speeches in this period found.

The material, including Warren’s previously unreported comments on regulations and her association with conservative groups, sheds new light on the early part of her career, before she became actively involved in politics.

Warren rarely discusses her evolution from a “moderate conservative,” as one former colleague described her to CNN, to a leading Democratic presidential candidate proposing ambitious liberal policies. She has said previously that as she established herself as one of the nation’s leading experts in bankruptcy, she came to realize through her research the need for aggressive regulation of the financial industry.

Warren changed her party registration from Republican to Democrat in 1996. Asked about the shift in 2014, she told ABC News that she realized the Republican Party “really stood up for the big financial institutions when the big financial institutions are just hammering middle class American families.”

As a presidential candidate, Warren has proposed regulations to rein in Wall Street and the private equity industry, as well as breaking up the largest tech companies like Facebook and Google. In a speech last year, Warren championed regulations as tools that “permits commerce to flourish,” “keep thieves out of our pockets” and level “the playing field for everyone competing for our business.”

In a statement to CNN, the Warren campaign argued that the Massachusetts Democrat’s views have remained consistent in that she has always been a proponent of large structural changes rather than many smaller regulations.

“Elizabeth has always believed that big, structural rules — rather than dozens of smaller regulatory requirements — protect families better, use regulatory resources more efficiently, and impose lower costs on companies,” Chris Hayden, a spokesperson for the Warren campaign, told CNN in an email.

‘She was a moderate conservative’

During the 1980s and 1990s, Warren worked as a law professor at the University of Houston, the University of Texas, the University of Pennsylvania and Harvard Law School, writing and conducting research on bankruptcy.

“She was a moderate conservative,” Jay Westbrook, a former colleague of Warren’s at the University of Texas Austin, told CNN in an interview.

In 1993, Warren was profiled by the Philadelphia Inquirer, which noted she sounded “like an entrepreneur” in arguing the government had too much regulation.

“Regulations have stretched and grown beyond all imagination,” she told the Inquirer. “And regulations are a tax, as real as reaching into your pocket and taking 33 percent for the IRS.

“The biggest part of government — regulation — is not even taught in law school,” she added.

Warren occasionally appeared at conferences and on panels for conservative groups such as the Manhattan Institute and a 1991 panel at The Federalist Society’s National Lawyers Convention on “Socialization of Risk: Bankruptcy Law and Financial Institutions.” KFile obtained copies of Warren’s speeches from the groups.

In her speech to the Federalist Society, a judicial organization that boasts membership of several conservative Supreme Court justices, Warren argued in favor of the federal bankruptcy system because it kept losses in the private sector and away from being a “socialized loss.” Warren predicted that “retired employees’ expectations” would be “the next big” cause of companies’ bankruptcies.

“We bought labor peace in the 70s and 80s by promising those employees that they were going to have retirements like you wouldn’t believe,” Warren said. “Well, you know what? They shouldn’t have believed because what’s happened is now it’s time to pay the piper.”

“If we’re really talking about responsibility here, the point I’d like to make is that the bankruptcy system is something for which we should say a little prayer every night because what it does is it stands between keeping this as a private loss and moving it over to a genuinely socialized loss,” she added.

Warren also discussed what she said was one of the key principles of federal bankruptcy law: that it forced private companies, not taxpayers, to deal with the losses in a business failure. Warren credited updated bankruptcy policy after the Chrysler bailout in the 1970s provided an alternative to big government bailouts.

“Eastern got into trouble said, help us out. Continental Airlines, Braniff Airlines said, help us out. Even Wix Lumber wanted help,” Warren said. “But by then the answer was, nuh-uh — that’s what Chapter 11 is there for. Your creditors, you debtors, go work it out privately. Work it out. You got into this arrangement without our help. You’ll deal with the losses, distribute the losses through chapter 11 and you’ll survive on the other end without our help.”

Her conservative views on economic issues could be seen early in her career as an academic as well. In one of Warren’s earliest works, a 1980 paper in the Notre Dame Law Review, Warren argued that utility companies were over-regulated.

“Eliminating regulatory lag will end the need for frequent rate hearings, and will, thus, reduce the administrative costs of regulation,” she wrote in the article first reported by Politico in April.

Warren has said she identified as Republican at the time because she worried that the government played too strong a role in markets.

“I was a Republican because I thought that those were the people who best supported markets. I think that is not true anymore,” Warren told the Daily Beast in 2011. “I was a Republican at a time when I felt like there was a problem that the markets were under a lot more strain. It worried me whether or not the government played too activist a role.”

Research leads to changing views

Researching bankruptcy in the 1980s and 1990s, Warren has said her views began to change.

Newspapers, nightly news broadcasts and radio shows began quoting her as one of the nation’s foremost experts on the industry. Her research, Warren said on ABC World News Tonight in 1991, found most debtors were “a surprisingly middle class cross section of America,” who had fallen on hard financial times.

“Her idea of what sort of the average person’s situation was in life I think really changed,” Westbrook told CNN.

Warren told Politico her research made her feel “worse than disillusionment” and she felt “shocked at a deep-down level,” when presented with findings of her research. Warren realized she no longer aligned with the Republican Party.

“I felt like the parties were moving and the conversation was moving,” Warren told the Boston Globe in 2012 during her Senate run. “I felt like I had stayed in the same place and the world had shifted around me.”

By the 2000s, she began calling for more forcefully for regulatory oversight of the financial industry. In an interview with The New York Times in September of 2000, Warren commented on the “disastrous” consequences of not regulating the lending industry.

“The next time the economy contracts we will see the disastrous effect of allowing 125 percent debt-consolidation mortgages and allowing lenders to charge rates of interest that were illegal just 20 years ago,” Warren said. “Bankruptcies will explode and we will all pay the price for this folly.”

In one study, published in 2001, Warren and her co-authors found that more than a half million Americans in 1999 turned to bankruptcy to help after illness or injury. Even those with health insurance, Warren wrote, faced financial ruin when confronted with a catastrophic medical event.

“The financial fallout from a serious medical problem cannot be held off with a basic coverage health insurance plan,” Warren and her co-authors wrote. “The amount of medical debt that is not covered, combined with the income effects of a serious medical problem, leave many families vulnerable to financial collapse, notwithstanding their status as ‘insured.’ These data show that many families with some health insurance are also just an accident or an injury away from financial disaster.”

Writing in the Dallas Morning News in July 2007, Warren, then a professor of law at Harvard, argued for creating a regulatory body for financial products — contrasting the safeguards in place for consumer products with financial products.

“The difference between the two markets is regulation,” Warren wrote. “Although considered an epithet in Washington since Ronald Reagan swept into the White House, the ‘R-word’ supports a booming market in tangible consumer goods.”

“Just as the Consumer Product Safety Commission protects buyers of goods and supports a competitive market, we need the same for consumers of financial products — a new regulatory body to protect consumers,” she added. “The time has come to put scare-mongering to rest and to recognize that regulation can often support and advance efficient and more dynamic markets.”